drversaw85
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| Can I afford a new car? |
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I am looking into purchasing a new car. My current monthly income is approx. $6300.00, my current monthly expenses total approx. $3100.00. My current car payment is $400.00/month, the new car would be around $600.00/month. Do you think an increase of $200.00/month is financially responsible at this income level? I also receive quarterly distribution payouts from a Sub-S Corporation I am involved in, averages around $2000.00/payout.
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Tue Feb 21, 2012 6:09 pm |
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littleroc02us
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Just so you know, by spending an extra $200 a month for a newer smelling car that depreciates by 60% in 4 years is like throwing away $434,265 that you could have made by putting it into a Roth IRA for 30 years making 10%. In my family we buy vehicles that are high quality low milaege (40k to 60k) in cash for anywhere from $10,000 to $12,000 that last 10 years. I'd rather retire with 2-4 million in tax free investments then to drive new cars when your making good money. I like the trade off better. New cars these days are complete rip offs because your paying for a depreciative asset that is over priced. Why does it have to be brand new?
Risk comes from not knowing what you're doing. (Warren Buffet)
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Tue Feb 21, 2012 7:43 pm |
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oldguy
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Yes, most anyone with a solid job and an $84,000 income can afford a new car. A far better question would be 'do you want to allocate that income stream to cars?" Late model cars are a status-marker among the young - so your answer might well be 'yes'. Or new cars may be a hobby with you - so again your snswer could be 'yes'. But if you are debating between "want" and "need" - you probably already know the answer? 
A continuous late-model car (trading every 4 or 5 yrs) has a cost of ownership (depreciation) of about $5000/yr. That is your cost before you drive it - ie, the cost to own a parked car.
If you buy a new car and keep it 12 yrs (or 200,000 miles), the cost of ownership is about $2000/yr.
The extra $3000/yr, invested in your Index Fund, really counts up - it is about $2,000,000 in 40 years. So it depends on your driving life - I started at 16 & I'm now 72, ie 56 yrs. Dad renewed his license for the last time at age 95. You see why most millionaires drive older cars?
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Tue Feb 21, 2012 10:29 pm |
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fast
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quote:
Originally posted by oldguy
You see why most millionaires drive older cars?
I see why most future millionaires drive older cars.
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Wed Feb 22, 2012 12:52 am |
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johna
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A brand-new car is never a good investment. Leasing is even worse. I agree that buying high quality low mileage used vehicles is the way to go. Let someone else pay for the depreciation. A new car is only new until someone dings it in a parking lot.
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Wed Feb 22, 2012 6:26 pm |
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2StepsFwd1StepBack
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quote:
Originally posted by oldguy
But if you are debating between "want" and "need" - you probably already know the answer?
LOL! Exactly.
quote:
Originally posted by oldguy
Late model cars are a status-marker among the young - so your answer might well be 'yes'.
This statement brings to mind something I've pondered about quite a bit over the last...oh...5 years or so.
Why do we behave like this? We. Us. Men.
The rare exception aside, most of us begin our adult life ignoring what makes good financial sense; opting instead for a hot car to attract a hot woman. But, by the time we're ready to switch from MTV to the History Channel, we're also purchasing used automobiles so that we can put more toward retirement.
Is it wisdom that we gain or testosterone that we lose?
Seriously.
I'll use myself as an example.
When I was in my mid-twenties, I was consumed with status symbols in the hopes of attracting a mate, whether for life or for a night - hot car; sweet apartment; nice clothes.
And then, by the time I was in my early thirties, I fell into the typical yuppie lifestyle... married with one child; another on the way. Double household income, mortgage, 2 new cars, 401k, seventy hour work weeks and 50 dollar bottles of wine.
Today, at 46 years of age, I find myself single again, just like in my twenties but gone is the desire to impress. Why is that? I don't care about what car I drive, and as long as my house is a home for me and my children, I'm happy. And, I would never at this point consider a foolish financial move for the sake of vanity.
My gut tells me I've grown up... gained wisdom...matured. But, sometimes, I truly wonder if, perhaps, it's got more to do with...complacency? Maybe I...we...become "set" in our life; our lifestyle. Why on God's Green Earth do I need a new car? This one has 105,000 miles and purs like a kitten. OMG! Did I just say that? I've turned into my Dad!
My sister, who just turned 50 but is young at heart, tells me I've turned into a curmudgeon (sp?). Bah humbug...what does she know? I like my life now... even with all the financial mis steps that have occurred in the last few years. I do plan to get back on track, and a new car every 4 years is not going to get me there.
But as the saying goes, I only wish I knew then what I know now. Sigh.
Now, 'scuse me while I go yell at the neighborhood kids to get off my lawn!
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Thu Feb 23, 2012 1:39 am |
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fast
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quote:
Originally posted by 2StepsFwd1StepBack
I'll use myself as an example.
Just to add a little to that, and I'll deny it if it comes up, but I listen to talk radio sometimes. I mean, when the hell did that start?
I guess we're just changing. Talk radio? OMG! Me? Not all the time though, lol.
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Thu Feb 23, 2012 1:53 am |
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2StepsFwd1StepBack
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quote:
Originally posted by fast
quote:
Originally posted by 2StepsFwd1StepBack
I'll use myself as an example.
Just to add a little to that, and I'll deny it if it comes up, but I listen to talk radio sometimes. I mean, when the hell did that start?
I guess we're just changing. Talk radio? OMG! Me? Not all the time though, lol.
At least it's not NPR! Not that I've ever listened to NPR. Nope. Not me. Ever.
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Thu Feb 23, 2012 2:22 am |
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cbhattarai
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Why dont you make all the payment and then try to get new car, because when you pay all amount you will get better credit score, and when you will apply for another loan, you will get less interest rate.
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Thu Feb 23, 2012 11:29 am |
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franks.benjamin
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Now I'm planing to buy a car on credit...
Thanks for the wonderful views.
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Fri Apr 13, 2012 6:41 pm |
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littleroc02us
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quote:
Originally posted by johna
A brand-new car is never a good investment. Leasing is even worse. I agree that buying high quality low mileage used vehicles is the way to go. Let someone else pay for the depreciation. A new car is only new until someone dings it in a parking lot.
I've got 2 of those in my garage right now paid for... Feels good!
Risk comes from not knowing what you're doing. (Warren Buffet)
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Mon Apr 16, 2012 7:45 pm |
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jennaberry
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Why are you in need of a new car since the payment for your current car is not yet finish, I think it would be much better if you first finish the payment for your current loans before applying for anew one.
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Fri May 11, 2012 3:15 am |
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Allen0
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Thu Jan 10, 2013 7:16 am |
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